Recent Dynamics in the Global CRITICAL Rare-Earths Market and ...

Recent Dynamics in the
Global CRITICAL Rare-Earths Market and the
Regionalization/Globalization of the Metals
Markets
Rare Earth Data and Market Analysis Produced and Visualized by
Gareth P Hatch, PhD
Regionalization/Globalization Analysis by by Jack Lifton
Founding Co-Principals, Technology Metals Research, LLC
February 28, 2013– International Seminar on Rare Earths-Kuantan, Malaysia

Overview
• An Introduction to the Rare Earths
• Rare-Earth Demand
• Current Rare-Earth Supply
• Chinese Mining & Export Quotas
• Rare-Earth Price Volatility
• The Politics of Rare Earths
• Other Supply & Demand Issues
• Future Sources of Rare-Earth Supply

Disclaimer & Cautionary Statement
The information contained in this presentation is provided by Technology Metals Research, LLC (“TMR”) and the
author, for general educational purposes only. Certain information herein is based on third-party sources that are
believed to be reliable, but whose accuracy is not guaranteed. It may also contain statements that could
constitute forward-looking statements, describing expectations, opinions or guidance that are not statements of
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demand, government policies, and other market dynamics, or the assumptions underlying any of the foregoing.
In this presentation, words such as "may", "could", "would", "will", "likely", "believe", "expect", "anticipate",
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Recent Dynamics in the Global Rare-Earth Market
I: An Introduction to the Rare Earths

Which are the 17 rare-earth elements
Source: Technology Metals Research
An Introduction to the Rare Earths
5

The rare-earth industry focuses on 15 elements
Source: Technology Metals Research
An Introduction to the Rare Earths
6

The rare earths can be divided into sub-groups
Source: Technology Metals Research
• Definitions relate to the processing of concentrates
• Used by metallurgists & flow-sheet engineers
• Not always used elsewhere in the industry
• Sm frequently grouped with lights; Eu & Gd with the heavies
• Be sure to know which convention is being used
• Make sure to compare “apples to apples”
An Introduction to the Rare Earths
7

The magnet-related rare earths
Source: Technology Metals Research
• For commercial permanent-magnet materials:
• Sm-Co type: Sm (Gd, Pr)
• Nd-Fe-B type: Nd, Pr, Dy (Tb)
• Sm-Fe-N type: Sm
An Introduction to the Rare Earths
8

The “alphabet soup” of rare-earth acronyms
• Rare-earth element – REE
• Rare-earth oxide – REO
• Light REE / REO – LREE / LREO
• Medium REE / REO – MREE / MREO
• Heavy REE / REO – HREE / HREO
• Critical REE / REO – CREE / CREO
• Total REE / REO – TREE / TREO
An Introduction to the Rare Earths
9

Why should I care about non-magnet-related REEs
• REEs are chemically very similar to each other – thus:
• They are always found together
• They have to be mined together
• They are very difficult to separate from each other
• They require complex processing routes, e.g. separation by
solvent extraction, and purification by ion exchange
• Facilities require significant capital & operational expenditures
plus time to train/find highly skilled chemical engineers and
technicians
• The dynamics for any one REE indirectly affects them all
• Magnet production can ∴ be affected by non-magnet REEs
An Introduction to the Rare Earths
10

Applications for REEs
• Significant growth in end-use demand
• New hi-tech products and devices in addition to new markets
• Increased market penetration of clean-energy platforms
• Potential HUGE near-term growth in numbers of people entering
the middle class in southeast Asia; in China and India in
particular
• Clean-energy applications require significant quantities
• Beware of the hype
• Be aware of the potential impact of legislation
• E.g. Effects of ban on incandescent light bulbs on HREEs
• Drive for more energy-efficient appliances and devices
An Introduction to the Rare Earths
11

Recent Dynamics in the Global Rare-Earth Market
II: Rare-Earth Demand

From where does the demand originate
33%
35%
2011e Demand
105 kt TREO
China
Rest of World
2016f Demand
160 kt TREO
67%
65%
Sources: IMCOA, Technology Metals Research
Rare-Earth Demand
13

From where does the demand originate
Estimate of global rare-earth demand in 2011 (t REO ± 15%)
End Use China USA
Japan &
SE Asia
Others
Total
Market
Share
Permanent Magnets 16,500 500 3,500 500 21,000 20%
Metal Alloys 15,000 1,000 4,000 1,000 21,000 20%
Catalysts 11,000 5,000 2,000 2,000 20,000 19%
Polishing Powders 10,500 750 2,000 750 14,000 13%
Phosphors 5,000 500 2,000 500 8,000 8%
Glass Additives 5,500 750 1,000 750 8,000 8%
Ceramics 3,000 1,500 2,000 500 7,000 7%
Other 3,500 500 1,500 500 6,000 5%
Total Demand 70,000 10,500 18,000 6,500 105,000 100%
Market Share 67% 10% 17% 6% 100%
Source: IMCOA
Rare-Earth Demand
14

From where does the demand originate
Forecast for global rare-earth demand in 2016 (t REO ± 20%)
End Use China USA
Japan &
SE Asia
Others
Total
Market
Share
Permanent Magnets 28,000 2,000 4,500 1,500 36,000 23%
Metal Alloys 23,000 2,000 3,000 2,000 30,000 19%
Catalysts 15,500 5,500 2,500 1,500 25,000 16%
Polishing Powders 13,000 2,000 2,000 1,000 18,000 11%
Phosphors 8,500 750 2000 750 12,000 8%
Glass Additives 7,000 1,000 1,000 1,000 10,000 6%
Ceramics 4,000 2,250 2,500 1,250 10,000 6%
Other 5,000 8,000 4,000 2,000 19,000 12%
Total Demand 104,000 23,500 21,500 11,000 160,000 100%
Market Share 65% 15% 13% 7% 100%
Source: IMCOA
Rare-Earth Demand
15

Recent Dynamics in the Global Rare-Earth Market
III: Current Rare-Earth Supply

From where does the supply originate
6%
31%
2011e Supply
103 kt TREO
China
Rest of World
2016f Supply
195 kt TREO
69%
94%
Sources: IMCOA, Chinese State Council Information Office, Technology Metals Research
Current Rare-Earth Supply
17

Current sources of Global REE supply Feb 28, 2013
Source: Technology Metals Research
Current Sources of Global Rare-Earth Supply
1
8

Recent Dynamics in the Global Rare-Earth Market
IV: Chinese Mining & Export Quotas

Rare-earth mining production in China
Province / Region
2011 Mining Quota
LREOs (t)
HREOs (t)
Fujian 0 2,000
Guangdong 0 2,200
Guangxi 2,500 0
Hunan 1,500 0
Inner Mongolia 50,000 0
Jiangxi 0 9,000
Shandong 1,500 0
Sichuan 24,400 0
Yunnan 0 200
Sub-totals 80,400 13,400
Total Quota 93,800
Actual Production 96,900
Sources: Technology Metals Research, Chinese Ministry of Land & Resources, Chinese State Council Information Office
Chinese Mining & Export Quotas
20

Chinese rare-earth export quotas
• China has been issuing export quotas for several years
• Ostensibly to “remediate” environmental issues
• Obvious “side-effect”: inward re-location of supply chain
• 2012: allocation contingent on better pollution controls
• Allocations split between L and M/HRE production
• Alloys and compounds not included
• 40% reduction in 2010 started the price increases
Chinese Mining & Export Quotas
21

Tonnes
Chinese rare-earth export quotas
60,000
50,000
Rare Earth Quota Issued
Rare Earth Exports*
40,000
30,000
20,000
10,000
0
2008 2009 2010 2011 2012
* rare-earth oxides only – other materials may constitute approx. 2-3,000 t / year
Sources: Chinese Ministry of Commerce, Chinese Ministry of Industry & Information Technology, Asian Metal
Chinese Mining & Export Quotas
22

Recent Dynamics in the Global Rare-Earth Market
V: Rare-Earth Price Volatility

What caused the recent REE price spike
• Triggered by 40% reduction in 2010 export quotas
• Led to disconnect between internal & export pricing
• Inflection point in Feb 2011 for internal China prices
• Internal stockpiling / speculation
• Siphoning to black market for export – arbitrage opportunity
• Prices peaked in Jul-Aug 2011
• Significant reduction in volumes of official exports
• Apparent increase in smuggling of rare-earth materials
Rare-Earth Price Volatility
24

Recent REO prices
Sources: Technology Metals Research, Metal Pages
Rare-Earth Price Volatility
25

How was the magnet industry affected
• Major efforts to reduce Nd-Fe-B usage in 2011-2012
• Switch from REPM to induction motors
• Switch from surface-mounted to interior REPMs
• Switch back to ferrite where possible
• Higher HREE-containing REPMs – some switched to Sm-Co
• Also efforts to “drop down” a grade or two
• Reducing Dy / Tb = significant cost savings
• Magnet REO demand: 2010 ≈ 26 kt; 2011 ≈ 21 kt
• Likely to rebound in 2012 – though end users are still wary
• At least one bankruptcy of a magnet company…
Rare-Earth Price Volatility
26

Recent Dynamics in the Global Rare-Earth Market
VI: The Politics of Rare Earths

Alleged REE embargo in 2010
• Sep 2010: Chinese fishing boat collides with Japanese
patrol boats near Senkaku Islands in East China Sea
• China accused of suspending REE shipments to Japan
• Japan releases fishing-boat captain
• Alleged suspension of shipments “lifted”…
• Whether or not it happened – it affected the outlook
The Politics of Rare Earths
28

The WTO rare-earth trade dispute
• March 2012: USA, EU & Japan initiate WTO action
• Covers exports of wide range of rare-earth-containing materials
• June 2012: State Council publishes REE white paper
• Sets out position on various topics without tying into WTO case
• July 2012: Dispute resolution panel set up
• China likely to cite two GATT Article XX exceptions:
• “necessary to protect human, animal or plant life or health”
• “relating to the conservation of exhaustible natural resources”
• China recently lost a similar case
The Politics of Rare Earths
29

Recent Dynamics in the Global Rare-Earth Market
VII: Other Supply & Demand Issues

Critical REEs for clean energy
Sources: US Department of Energy, Technology Metals Research,
Other Supply & Demand Issues
31

The balance between REE surplus and deficit
• Demand profile of each REE vs. natural occurrence:
• Ratio Dy : Pr + Nd ≈ 1:50 – 1:2 for permanent magnets
• Ratio Dy : Pr + Nd ≈ 1:100 – 1:50 in typical LREE minerals
• Impetus for finding new sources of HREE-rich minerals
• Even HREE-rich minerals contain significant LREEs
Forecast for global supply and demand for select rare earths in 2016
CeO 2 Nd 2 O 3 Eu 2 O 3 Tb 4 O 7 Dy 2 O 3 Y 2 O 3
Demand @
150-170 kt/yr TREO
Supply @
180-210 kt/yr TREO
60-70 kt 25-30 kt 625-725 t 450-550 t 1.5-1.8 kt 12-14 kt
75-85 kt 30-35 kt 450-550 t 300-400 t 1.3-1.6 kt 9-11 kt
Source: IMCOA
Other Supply & Demand Issues
32

Recent Dynamics in the Global Rare-Earth Market
VIII: Future Sources of Rare-Earth Supply

Non-Chinese REE projects
• As of August 2012, TMR was tracking:
• 441 REE projects in 37 countries outside of China
• 90%+ at early stages of exploration & development
• Currently 43 advanced projects on TMR Index
• Completed drilling and testing to a minimum level
• Full list is available at www.RareEarths.org
Future Sources of Rare-Earth Supply
34

Future sources of REE supply
Source: Technology Metals Research
Future Sources of Rare-Earth Supply
35

Future sources of REE supply outside of China
Source: Technology Metals Research
Future Sources of Rare-Earth Supply
36

Next challenge: producing separated REE products
• A particular issue for projects with HREE-rich
deposits
• Many such companies plan to produce concentrates
only
• But end users can’t use REE concentrates!
• Very few separation facilities outside of China
• Even fewer independent, toll-based separation facilities
• A solution: build a centralized CREE separation
facility
Future Sources of Rare-Earth Supply
37

Existing Non-Chinese Company-Dedicated Rare Earth Separation Facilities
Feb 28, 2013
Source: Technology Metals Research
Existing Non Chinese REE Separation Facilities
3
8

Future sources of REE supply
Source: Technology Metals Research
Future Sources of Rare-Earth Supply
3
9

Future sources of REE supply outside of China
Source: Technology Metals Research
Future Sources of Rare-Earth Supply
4
0

Existing and Proposed Non-Chinese Company-Dedicated or Tolling Rare Earth Separation Facilities
Feb 28, 2013
Source: Technology Metals Research
Non Chinese REE SX Plants Existing and Proposed
4
1

Current Non Chinese REE Metal/Alloy Producers
Source: Technology Metals Research
Non Chinese REE Metals/Alloys Producers
4
2

Thank You
Jack Lifton
Founding Principal
Technology Metals Research, LLC
31126 Country Bluff
Farmington Hills, MI 48331
United States of America
+1-847-867-3091
jlifton@techmetalsresearch.com
www.techmetalsresearch.com
4
3

Thank You
Gareth P Hatch, PhD
Founding Principal
Technology Metals Research, LLC
180 S. Western Ave #150
Carpentersville, IL 60110
United States of America
+1-847-867-3091
ghatch@techmetalsresearch.com
www.techmetalsresearch.com